Canopy loses CA$578 million in quarter as cannabis revenue plunges

Canadian cannabis producer Canopy Growth lost another 578.6 million Canadian dollars ($454 million) in its fourth fiscal quarter for the period ended March 31 as its adult-use sales collapsed 36% compared to the previous year.

The latest loss comes one month after the struggling business slashed 8% of its workforce, or 245 of its employees, as part of sweeping changes across the company intended to generate up to CA$150 million in savings within 18 months.

Roughly 1,600 people at Canopy have lost or left their jobs since 2020, when David Klein became CEO.

Canopy reported net sales of CA$111.8 million in the latest quarter, significantly lower than analysts’ expectations of approximately CA$130 million.

Canadian recreational cannabis sales declined to CA$38.9 million in the fourth quarter, lower than the $61.1 million in sales in the previous year’s fourth quarter.

Canadian medical cannabis sales also fell sharply, to CA$52 million, down from CA$74.8 million last year.

Global cannabis net revenue, which includes medical and recreational sales, fell to CA$66 million in the quarter ended March 31, 2022, about 35% lower than the same period last year.

Dry flower in the recreational market was a major drag on Canopy’s revenue, falling 38% in the fourth quarter of 2022 compared to the fourth quarter of 2021.

Sales of oils and softgels also weighed on overall revenue as those products experienced an 18% decline in year-over-year sales in the fourth quarter to only CA$5.5 million.

The fourth-quarter loss brings Canopy’s cumulative losses since 2015 to CA$4.1 billion. Only Aurora Cannabis has lost more money in that time frame.

Canopy reported net sales of CA$520 million in fiscal 2022, down 5% from 2021’s CA$546.6 million.

Over the same period, industrywide recreational cannabis sales grew 36% in Canada to approximately CA$4.02 billion in the 12 months ended March 2022.

Chief Financial Officer Judy Hong said the company is focused on attaining profitability.

“Achieving profitability is critical, and we have undertaken additional initiatives to streamline and drive efficiencies for our global cannabis business,” Hong said in a news release.

“In (fiscal) 2023, we are focused on executing our path to profitability in Canada, while we continue to invest in high potential opportunities – particularly in BioSteel, and further developing our U.S. THC ecosystem, which we believe remains significantly under-appreciated by the market.”

Sales of the company’s BioSteel beverages fell 1% in the fourth quarter of 2022 compared with CA$13.5 million in the fourth quarter of 2021.

However, in 2022, BioSteel sales grew an impressive 56% to CA$44.6 million.

In its news release, Canopy attributed its recreational cannabis sales decline over the previous year to a continued insufficient supply of flower products “with in-demand attributes and continued price compression, particularly in the value-priced dried flower category.”

Canopy’s direct-to-consumer sales of recreational marijuana in its stores plunged 26% in the fourth quarter of 2022 versus the fourth quarter of last year, driven by increased retail competition across provinces.

Canopy’s adjusted EBITDA loss in fiscal year 2022 was CA$415 million, which was CA$75 million worse than last year.

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Canopy said the year advances its premium brand strategy and laying a foundation for long-term sustainable growth and profitability.

As of March 31, Canopy had cash and short-term investments worth CA$1.4 billion.

Canopy shares trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq.

Matt Lamers can be reached at matt.lamers@mjbizdaily.com.